Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2015 Winter 2nd Sem 820003 Financial Management Fm Previous Question Paper

Seat No.: ________ Enrolment No.______________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER ?II - EXAMINATION ? WINTER 2015

Subject code: 820003 Date: 19/12/2015

Subject Name: Financial Management (FM)

Time: 02.30 PM TO 05.30 PM Total Marks: 70

Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) Briefly explain the factors that determine the working capital needs of

a firm.

07

(b) Give arguments to support the view that dividends are relevant 07

Q.2 (a) What are the factors that influence the dividend policy of a firm 07

(b) Explain the main objectives of credit policy? Discuss the optimum

credit policy

07

OR

(b) What are the sources of working capital finance? 07

Q.3 (a) Contrast the salient features of the traditional and modern approaches

to financial management?

07

(b)

An investment promises to pay Rs.2000 at the end of each year for the

next 3 years and Rs.1000 at the end of each year for years 4 through

year 7.

Required

1.What maximum amount will you pay for such investment if your

required rate of return is 10 percent?

2. If the payments are received in the beginning of the year, what

maximum amount will you pay for the investment?

07

OR

Q.3 (a) Three bonds have face value of Rs. 1000, coupon rate of 10 percent

and maturity of 5 years. One pays interest annually, one pays interest

half-yearly, and one pays interest quarterly. Calculate the prices of

bonds if the required rate of return is 12 percent.

07

(b) Discuss the important functions performed by financial markets. 07

Q.4 (a) A firm is considering the following two mutually exclusive

investments

Cashflows

Year-0 Year-1 Year-2 Year-3

A -25000 15000 15000 25640

B -28000 12672 12672 12672

The cost of capital is 12 percent. Compute the NPV and IRR for each

project. Which project should be undertaken?

07

(b) Explain the different approaches for estimation of Cost of Equity 07

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1/2

Seat No.: ________ Enrolment No.______________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER ?II - EXAMINATION ? WINTER 2015

Subject code: 820003 Date: 19/12/2015

Subject Name: Financial Management (FM)

Time: 02.30 PM TO 05.30 PM Total Marks: 70

Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) Briefly explain the factors that determine the working capital needs of

a firm.

07

(b) Give arguments to support the view that dividends are relevant 07

Q.2 (a) What are the factors that influence the dividend policy of a firm 07

(b) Explain the main objectives of credit policy? Discuss the optimum

credit policy

07

OR

(b) What are the sources of working capital finance? 07

Q.3 (a) Contrast the salient features of the traditional and modern approaches

to financial management?

07

(b)

An investment promises to pay Rs.2000 at the end of each year for the

next 3 years and Rs.1000 at the end of each year for years 4 through

year 7.

Required

1.What maximum amount will you pay for such investment if your

required rate of return is 10 percent?

2. If the payments are received in the beginning of the year, what

maximum amount will you pay for the investment?

07

OR

Q.3 (a) Three bonds have face value of Rs. 1000, coupon rate of 10 percent

and maturity of 5 years. One pays interest annually, one pays interest

half-yearly, and one pays interest quarterly. Calculate the prices of

bonds if the required rate of return is 12 percent.

07

(b) Discuss the important functions performed by financial markets. 07

Q.4 (a) A firm is considering the following two mutually exclusive

investments

Cashflows

Year-0 Year-1 Year-2 Year-3

A -25000 15000 15000 25640

B -28000 12672 12672 12672

The cost of capital is 12 percent. Compute the NPV and IRR for each

project. Which project should be undertaken?

07

(b) Explain the different approaches for estimation of Cost of Equity 07

2/2

OR

Q.4 (a) A company is considering a proposal of installing a drying equipment.

The equipment would involve a cash outlay of Rs. 600000 and working

capital of Rs80000. The expected life of the project is 4 years with an

estimated salvage value of Rs.250000 at the end of its life. working

capital will be liquidated at par at the end of equipment life.

Depreciation rate is 20% WDV. Tax rate is 30%. The estimated before

tax cash flows are given below.

Yr 1 2 3 4

EBDIT 150000 150000 250000 240000

Required:

Estimate cash flows of the project and compute NPV if the cost of

capital is 12 percent.

07

(b) Max Ltd., and all equity firm, is evaluating the following projects:

Project Beta Expected Return(%

P 0.6 13

Q 0.9 14

R 1.5 16

S 1.5 20

Risk free rate is 10 percent and the expected market premium is 8

percent. Max?s cost of capital is 18 percent. Which projets would be

accepted or rejected incorrectly on the basis of the firm?s cost of capital

as hurdle rate?

07

Q.5 (a) Consider the following information;

Rs. In lakh

EBIT 1120

PBT 320

Fixed cost 700

Calculate DOL, DFL and DCL

07

(b) What are the different sources of long term finance? 07

OR

Q.5 (a) Describe the traditional view on the optimum capital structure.

Compare and contrast this view with the NOI approach and NI

approach.

07

(b) Define a lease. How does it differ from hire purchase? What are the

cash flow consequences of a lease?

07

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This post was last modified on 19 February 2020